The Google-dominated online ad market has been rocked to its very foundations by recent court decisions. On Thursday, U.S. District Judge Leonie Brinkema decreed that Google had “willfully engaged in a series of anticompetitive acts” to maintain monopoly power over the ad tech industry. The decision has the ability to seismic-shift the business, as the Department of Justice (DOJ) demands the dismantling of Google’s ad tech monolith.
At the center of the case is Google’s monopoly of two of the most critical elements of the ad tech stack: ad server on the publisher side and ad exchange. They are the keystone of Google’s $31 billion ad business unit that brings web page publishers together with advertisers. Judge Brinkema decreed that Google unreasonably connected the two systems, effectively monopolizing the marketplace and driving competition out. As Brinkema wrote in her memorandum opinion, Google’s conduct has “substantially harmed Google’s publisher customers, the competitive process, and, ultimately, consumers of information on the open web.”
The numbers are staggering. Google’s ad server, originally called DoubleClick for Publishers (DFP), enjoys a 90% market share, and its ad exchange, AdX, controls the world market 54% to 65%. To put this into perspective, the second-largest player in the ad exchange space only has 6% control. This has enabled Google to capture about 20% from every ad auction, and its competitors get the rest with teeny margins. Even a single Google employee described the company’s situation as “a major bank owning the stock exchange,” highlighting the inbuilt conflict of interest of possessing both sides of the trade.
The decision is Google’s second major antitrust setback in a year. In August last year, another federal judge held that Google unlawfully monopolized the internet search market. Cumulatively, the actions highlight the sweep of antitrust complaints against Alphabet, Google’s parent, as regulators around the world scrutinize its actions. The DOJ has already put forward remedies to Google’s search monopoly, such as spinning off its Chrome browser and ceasing its solo deals like its deal to default iPhones on Google Search.
The dangers of a breakup are massive. If Google had to divest its ad technology division, it could provide an opportunity for smaller players to gain market share and lower prices for publishers and advertisers. As Damian Rollison, senior director of market insights for Soci, pointed out, “The company stands to lose a lot more in material terms if its ad business, long its main source of revenue, is broken up.” However, the complexity of such a move cannot be overstated. Andrew Frank, a Gartner analyst, said Google’s ad-tech architecture has taken “decades in the making,” and unwinding it would be “significant challenge.”
No surprise there, Google appealed the decision. Google Vice President of Regulatory Affairs Lee-Anne Mulholland stated, “We won half of this case and we will appeal the other half.” She stated the court held Google’s advertiser tools and acquisitions, including DoubleClick, did not harm competition. Mulholland contends publishers love to use the ad tech systems of Google because they are “cheap, easy, and efficient.” But the DOJ estimates Google’s action has taken away the choice of one competitor to have a greater expense for publishers based on its technology.
The case reopened the question of the broader monopoly vision in the digital age. Senator Elizabeth Warren was also delighted with the action as “a big win in the fight to break up Big Tech,” with Sacha Haworth, executive director of the Tech Oversight Project, describing Google’s monopoly as a power that has suffocated the media industry and forced middleman taxes on everything we buy online. This is supported by mounting public and governmental pressure to curb the grip of tech monopolies such as Google, Meta, and Amazon.
Google’s antitrust misdeeds will be determined by the remedies phase of the trial in the coming couple of years. Divestitures such as the sale of Google Ad Manager are on the horizon or behavior modifications with restrictions on the way Google runs its ad tech business. The appeals process can take years to work itself out, leaving publishers, advertisers, and competitors in limbo. As Frank quoted, “Many publishers and advertisers will be waiting to see how things shake out before making any big decisions given how much they rely on Google’s technology.”
For businesspeople, lawyers, and analysts, the case is a turning point in the long struggle against anticompetitive practices in the digital age. Regardless of whether Google’s ad tech monopoly is dissolved or reformed, whatever happens, it will reshuffle the lines of online advertising for decades to come.
Google’s antitrust challenges are just getting started, and the world will watch the next act with bated breath.
